Notes of interest from Apple's Q2 2014 conference call

Apple surprised the market on Wednesday by not only beating expectations for its second fiscal quarter of 2014, but also announcing a 7-for-1 stock split, increased share buybacks, and a a higher quarterly dividend. Following the announcements, executives from the company participated in a conference call with analysts and the media, and notes of interest follow.

Apple ended quarter with $156 billion in cash, about $18 billion of it held domestically

Apple has no plans to repatriate hits huge overseas cash sum, saying it would not be a valuable move for shareholders

7-for-1 stock split will take place June 2, 2014, trading will begin split-adjusted on June 9

Apple's iPhone business

iPhone sales were up 17 percent years over year. Apple specifically cited China Mobile as leading an all-time quarterly record in the nation of China.

In Japan, iPhone sales were up 50 percent year over year. Strong growth was also seen in "many other developed markets."

iPhone also saw strength in Brazil, Poland, Turkey, and Indonesia with "strong double-digit" growth. Sales in India also more than doubled.

Siemens has 30,000 iPhones deployed among its employees, with numerous in-house apps developed.

iPhone ASPs were down a little over $40 this quarter, largest sequential decline to date. About half of that decline was driven by sales of the iPhone 4S in emerging markets, Maestri said. The rest was lower capacity mix while moving away from the launch quarter.

"We sold a very, very low single-digit percentage (of iPhone 4 units)," Cook said. Those sales had a minimal impact to results on the quarter.

iPhone 4S drew in new user ratios in the 80 percent range in some markets, Cook said. "If we can get them in on the entry iPhone, it gives them a great product at a great value and gets them into the ecosystem." Cited Apple's ability to keep customers.

Apple's expanded share buyback program

Cook said Apple plans to continue to investing in R&D, supply chain, retail, marketing, distribution, and expansion into new markets.

Apple plans to have enough cash on hand to be flexible, but the company plans to revisit its capital allocation program every year.

Cook said Apple is fortunate to be able to return "significant" capital to shareholders.

Program is increased by $30 billion, for total program size of over $130 billion. Cook called the size and pace "unprecedented," and completion is still expected for December of 2015.

"Vast majority" of its program is focused on share repurchases, because Apple believes its current share price does not reflect the value of the company.

Dividend increase for the second time in two years is "meaningful," Cook said. Apple is planning for annual dividend increases going forward.

Apple's iPad business

Cook said iPad shipments came on the high end of Apple's own estimates, though the 16.3 million units shipped disappointed analysts.

Cook said he continues to believe that the tablet market will surpass the PC market in size in the next few years, and that Apple will be a major player in this market.

Channel inventory was reduced this year, while last year the company increased channel inventory by 1.4 million units.

iPad users in America generate almost 4 times the traffic of Android tablets.

Among people planning to purchase a tablet within 90 days, two thirds plan to buy an iPad.

"Thousands" of iPads being used at delivery company FedEx every day.

U.S. Department of Veterans Affairs is planning to deploy 11,000 iPads to change how doctors and patients interact. Will allow quick access to real-time secure medical information.

iPad has over 95 percent share of U.S. education market.

iPad "absolutely has been the fastest growing product in Apple's history," Cook said. Company has sold over 210 million to date, which is more than the company initially thought was possible, and is also almost twice as many iPhones as the company sold in a comparable period of time.

91 percent of tablet activations in enterprise are iPads.

Cook said Apple has to focus on iPad penetration in both education and enterprise markets to drive further sales.

The release of Microsoft Office for iPad will help drive sales, Cook said. How much is unclear, but the CEO said it would have been better for Microsoft if they had come to market earlier.

"Office is still a very key franchise in the enterprise, in particular, and I think having it on the iPad is good," Cook said.

Customer satisfaction with iPad is at 98 percent. Cook said "there's almost nothing in the world" with a 98 percent satisfaction rate.

"There is no shortage of work going in" on how to make the iPad better going forward. No shortage of ideas for future directions for iPad either, Cook said.

Apple's iTunes and App Store businesses

Cook called iTunes a major part of Apple's business.

Sales were up to $2.6 billion.

Cumulative app downloads are over 70 billion.

The App Store generated 85 percent more revenue than Google Play in the March quarter.

Apple's Mac business

Apple cited strong performances from the MacBook Pro and MacBook Air.

The Mac has gained market share in 31 of the last 32 quarters.

Apple's retail business

First stores in Brazil and Turkey opened in the quarter.

Angela Ahrendts joins Apple's executive team next week

Apple's next (Q3 F2014) quarter

Apple is investing "heavily" in R&D into the next quarter, for both current products and future products and services.

Does that mean 7x the dividend moving on plus whatever the increase is per share or will the dividend also be divided by 7?

I was looking for the ¿ at the end of your question. All things remain relative in a stock split....7x the amount of shares, 1/7 the share price and 1/7 the dividend. Plus, obviously, earnings per share will be 1/7, also, which directly relates to the dividend.

I was looking for the ¿ at the end of your question. All things remain relative in a stock split....7x the amount of shares, 1/7 the share price and 1/7 the dividend. Plus, obviously, earnings per share will be 1/7, also, which directly relates to the dividend.

I figured that was the case but I've always seen dividends are being per share so I wasn't 100% sure.

This bot has been removed from circulation due to a malfunctioning morality chip.

For those that want some REALLY good historical data on Apple, go to this site. It's fairly up to date and they present the information in a lot of useful ways to analyze the company aside from their financial reports (Balance Sheet, Income Statement and Cash Flow). This site breaks down products sales, etc. it's a GREAT site to analyze Apple from a more detailed look at their revenue stream by product category, etc. etc.

For those that want some REALLY good historical data on Apple, go to this site. It's fairly up to date and they present the information in a lot of useful ways to analyze the company aside from their financial reports (Balance Sheet, Income Statement and Cash Flow). This site breaks down products sales, etc. it's a GREAT site to analyze Apple from a more detailed look at their revenue stream by product category, etc. etc.

Yeah, it rocks. The ONLY thing I would LIKE to see on the site, but I know he can't, is sales per SKU. It would be nice to see the sales of each model desktop, laptop, iPhone/iPod/IPad model just to see trends and breakdowns in the market.

He has made some cool changes with how the data is presented, but it's up to date fairly quickly and I routinely spend at least 30 hours quarter looking at the numbers and noticing year to year trends by quarter.

He's got other companies that he plans on putting up, so maybe soon he'll have other companies we want to look at, but this site is a MUST HAVE for ANYONE that wants to see Apple, or the other companies listed from a more detailed perspective.

@drblank: Thanks a lot for the praise, that is really nice of you. You’re right, sales per SKU would be awesome. If only Apple would officially release that data… But I think Asymco does a perfect job in analyzing and estimating numbers of that kind.

@SolipsismX: Thanks a lot for noticing that! :-)

Right now I’m refactoring a lot in the backend of the site to make it a lot better. After that I will continue to add new companies. Stay tuned! :-)

The 95% and 91% market share for Education and Enterprise, respectively, is absolutely staggering, and is the most important take-away from today's conference call. Those numbers, in a nutshell, explain why IOS users outspend Android users by a significant margin. Educated consumers with disposable income choose iOS over Android. The future is bright. $150 a share by 2016.

Does anyone know have an idea of what the repatriation tax rate is? Would the cash be taxed as income just as if it was earned in the US? Is there a snowball's chance in hell that the Fed Gov't would create a repatriation tax holiday in the foreseeable future? What is Apple ultimately going to do with the $120b that sits overseas? Is there a way they can spend that $? Acquisitions? It would be nice if APple Insider would editorialize this aspect of Apple's business. Thanks.

I was looking for the ¿ at the end of your question. All things remain relative in a stock split....7x the amount of shares, 1/7 the share price and 1/7 the dividend. Plus, obviously, earnings per share will be 1/7, also, which directly relates to the dividend.

Gonna be strange to see Apple trade in the $80 area. And then earnings of $1.50+ a share.

Yep did not take the analysis long to come up with why apple is Doomed, they were disappointed Apple did not announce any new products on the call. They are still making statement that apple is over valued since they have no new product and the fact they were not introduced yesterday show that apple has nothing in the pipeline.

Is the investment community that stupid to listen to analysis making that statement when Apple entire history they never intro a product on an earning call.

The 95% and 91% market share for Education and Enterprise, respectively, is absolutely staggering, and is the most important take-away from today's conference call. Those numbers, in a nutshell, explain why IOS users outspend Android users by a significant margin. Educated consumers with disposable income choose iOS over Android. The future is bright. $150 a share by 2016.

I agree. I'm particularly happy to see the Enterprise number so high because it also means Microsoft has been frozen out of the market where it once enjoyed total dominance. They came late to the party with so-so products and couldn't muscle themselves back in and dominate. Another market Microsoft lost out on is the U.S. government purchases for phones and tablets. The GSA went through the whole process from RFQ to award while Microsoft sat out the process. That was a three-year contract with a three-year optional extension. Apple was the only company who's phone and table was accepted.

Someday someone will write a book on how Steve Ballmer pissed away Microsoft's future in mobile devices and overall dominance of Enterprise and Government; and I will stand in line to buy it.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge

Does anyone know have an idea of what the repatriation tax rate is? Would the cash be taxed as income just as if it was earned in the US? Is there a snowball's chance in hell that the Fed Gov't would create a repatriation tax holiday in the foreseeable future? What is Apple ultimately going to do with the $120b that sits overseas? Is there a way they can spend that $? Acquisitions? It would be nice if APple Insider would editorialize this aspect of Apple's business. Thanks.

Apple has already been taxed once by the various governments on their earnings. They would be taxed on the post-tax income by the US Gov. Without any expenses to offset the income, the owed tax would be high. The US government would benefit by a tax holiday because that money could stimulate the US economy greatly - especially if that were a stipulation of the holiday.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge

I agree. I'm particularly happy to see the Enterprise number so high because it also means Microsoft has been frozen out of the market where it once enjoyed total dominance. They came late to the party with so-so products and couldn't muscle themselves back in and dominate. Another market Microsoft lost out on is the U.S. government purchases for phones and tablets. The GSA went through the whole process from RFQ to award while Microsoft sat out the process. That was a three-year contract with a three-year optional extension. Apple was the only company who's phone and table was accepted.

Someday someone will write a book on how Steve Ballmer pissed away Microsoft's future in mobile devices and overall dominance of Enterprise and Government; and I will stand in line to buy it.

Ballmer ran Microsoft with WAY too much arrogance just sitting on the entrenched monopoly and the thought that people actually will stand in line to buy any piece of hardware with the name Microsoft on it. What he doesn't realize or didn't was that most Windows users are forced through their companies to use Microsoft Windows computers and Office. But when a company opens up the platform choice to the employee REALITY is that a fairly large percentage of employees want Apple or Android. This is now proven fact. I don't know of a single company that has opened up the doors for the employees to choose the platform where they ONLY wanted Microsoft. This mind set is opening up a lot of new doors for Apple, Android as well. The problem Apple faces in the Enterprise market is that the IT Administration software that they use to manage their PCs (I think it's a Microsoft product, which shouldn't be a surprise) only supports PCs and not both PCs and Macs. This is the kind of sleazy things Microosft does. They open the door for Apple with things like Exchange, Office, but that door doesn't open wide enough to allow more Enterprise customers for switching or REALLY opening the door for Apple. Ballmer blew it with Zune, Surface, Windows 8/8.1 and Windows Phones that I think they might actually have to shut down Nokia and maybe have to sell it off, because they aren't getting the traction they really need to be profitable. Oops.

Ballmer ran Microsoft with WAY too much arrogance just sitting on the entrenched monopoly and the thought that people actually will stand in line to buy any piece of hardware with the name Microsoft on it. What he doesn't realize or didn't was that most Windows users are forced through their companies to use Microsoft Windows computers and Office. But when a company opens up the platform choice to the employee REALITY is that a fairly large percentage of employees want Apple or Android. This is now proven fact. I don't know of a single company that has opened up the doors for the employees to choose the platform where they ONLY wanted Microsoft. This mind set is opening up a lot of new doors for Apple, Android as well. The problem Apple faces in the Enterprise market is that the IT Administration software that they use to manage their PCs (I think it's a Microsoft product, which shouldn't be a surprise) only supports PCs and not both PCs and Macs. This is the kind of sleazy things Microosft does. They open the door for Apple with things like Exchange, Office, but that door doesn't open wide enough to allow more Enterprise customers for switching or REALLY opening the door for Apple. Ballmer blew it with Zune, Surface, Windows 8/8.1 and Windows Phones that I think they might actually have to shut down Nokia and maybe have to sell it off, because they aren't getting the traction they really need to be profitable. Oops.

Hmm..."arrogance" is a good way to describe Uncle Fester, AKA Steve Ballmer. I was present when a developer questioned him about Microsoft's love of keyboards as the prime method of communicating with computers. This was after the iPhone came out but before the iPad. Fester responded, "We use keyboards because our customers want keyboards." BOOM, end of subject!

I'm sure I was not the only person who thought to themselves, "This guy isn't even curious why someone might ask such a question. The topic was poison in his mind." So, it wasn't any surprise then the Surface appeared a few years later with the keyboard front and center and demanding the need for a desk top. It was also laden with lots of ports as if tying a computer down with cables was essential to getting work done. By the time you got the Surface running you needed a power source... so add another cable. And THIS, my friend was Uncle Fester's vision of portability.

The product has gotten better over time, but Uncle Fester's greasy paw prints are still all over it.

"That (the) world is moving so quickly that iOS is already amongst the older mobile operating systems in active development today." — The Verge